When the government goes into debt, the people go into debt
The people blame the politicians. They should blame themselves because the politicians were put in office by the electorate. The massive debt in this country has accumulated over decades; thus, the fault lies mainly with the voters rather than with any individual politician, group of politicians or political party.
The problem is that increasing debt has been the “path of least resistance” when government officials try to solve budget problems. Every year, budget deficits exist. How are they remedied?
• Tax hikes. In order to bridge budget deficits, large income-tax hikes would be necessary. Largescale income-tax hikes could be enacted, even larger than what we’ve seen with property-tax hikes, but such hikes are politically unpopular and legislators who pass them rarely get re-elected. In addition, massive income-tax hikes have an adverse effect on private-sector business growth; thus, most economic advisers are against it. We do see moderate income-tax hikes enacted periodically, but they are not nearly enough to bridge the budget deficit.
• Cut spending. Another option is to massively cut spending. I’m not talking about freezing spending or limiting its growth, I’m talking about massive 10 percent-plus cuts. The mere mention of this induces the same response we’ve been hearing for decades. Legislators call these cuts “mean-spirited” or particularly hurtful to the middle and lower classes who lack the resources to pay for services formerly provided by the government at little or no charge. In addition, such spending cuts are politically unpopular, and legislators who pass them rarely get re-elected.
• Borrow money. This has been the option taken for decades. It “works” because it defers the problem to another day and thus to another government official. It “works” because the current electorate benefits at the expense of future generations. You may have heard the term “mortgaging the future of our children and grandchildren” when referring to government debt. That’s exactly what is happening. It “works” because there is the assumption that when the principal on government-debt instruments come due, more government debt can be issued to pay off the old debt and keep the process going. It’s a Ponzi scheme of sorts and it “works” because government can’t go out of business — it just goes further into debt. But at some point the interest payments on the debt will become such a large part of the budget that no further debt can be incurred. When that happens, government officials will move on to the next option.
• Let the presses roll. If you can’t raise taxes and you can’t cut spending and you’re in debt to the hilt, what’s left? Well, if you’re the federal government, you print money like there’s no tomorrow. You keep some for yourself and give the rest to the states that pass it to the counties and municipalities. When we get to that point, we’re really going to be in trouble. Increasing the money supply decreases the buying power of the money. I fear that when this happens, inflation could be at levels not ever seen in this country before.
The underlying problem is that people want it both ways. They want all the government services they can get, but they don’t want to pay for it with higher taxes or fees.
Whenever the government goes into debt, we the people go into debt. It’s not as if the private citizens are in one corner and the government is in a separate corner — we are the government and the government is us. It’s about time we started electing officials who understand this, but in order to do so, we the people need to understand it first.
Mark Ferry East Brunswick
